ECONOMICS
SOCIAL CAPITAL IN PIERIGA REGION
Ed teIgaune Latvia University of Agriculture E-mail: [email protected]
Abstract
At rural enterprises, besides the traditional resources - natural, nancial, and human capital - there is some other kind of capital - it is social capital. Foreign scientists have done a lot of researches on it. The nature of social capital and its role in economics is not much studied in Latvia. The present scienti c article re ects consumptions on social capital by dierent foreign scientists. The World Bank as an institution has also approached to the research of social capital. It studies social capital at institutions. The World Bank describes the social capital of two kinds. The scienti c article characterizes Pieriga region. Rural enterprises and businessmen of agricultural, industrial and service branches in Pieriga region have been enquired. By the results of the enquiry, the presence of social capital in rural enterprises and its impact on their development have been analysed. Keywords: social capital, enterprise, region.
Introduction Since rst years of work of the European Union, the role of the states tends to decrease but In 1990s, besides the already existing concepts the role of the regions in the EU tends to increase. of nance, real and human capital, a new concept `Region' and `regional development' have become appeared - social capital. It is considered that commonly used notions. Nowadays there is a lot social capital is as important in analysis of small of regional research performed, and controversial business and entrepreneurship as the rest kinds of discussions on objective validity of a region take the capital. Therefore the author studied some place. of the multiple links between social capital and The aim of the present paper is to determine entrepreneurship. the in uence of social capital in enterprises of Social capital as a feature of community is Pieriga region. involved in usefulness of an individual and gives The tasks of the research are: satisfaction or dissatisfaction with oneself. It forms important aspects of the behavior of an 1. to explain the role of social capital; individual - the behavior that presents tendency 2. to characterize Pieriga region; of a person towards concrete contexts of social 3. to study the in uence of social capital on capital. An individual gets positive usefulness development of the enterprises in Pieriga from the very existence of social capital and acts region. correspondingly. We have to assume that straight involvement of social capital can be negative or Hypothesis was advanced: social capital positive: a person can be delighted knowing that promotes the development of rural enterprises in there is social capital at the community or the Pieriga region. person can be dissatis ed with the fact. The variant depends on the kind of social capital - Materials and Methods links, loyalty, nets, support, and trust - in the For the aim and the tasks of the scienti c community or enterprise. article, scienti c literature was studied in There are some countries in the world, also monographic way. Resources were explored also Latvia, where, in the result of fast urbanization, regarding Pieriga region and enterprises. The citizens of towns are situated equally throughout most important scientists and their devotion were the state territory in many towns but there is one determined. It was important to clear indicators city with inadequately huge number of residents. of social capital that could be used to determine The percentage of Riga citizens makes 32% of its in uence on enterprises of Pieriga region. all the state inhabitants but the number of the Research methods were developed as the result. employed is even greater (Ozoli na,2006), which To approbate the suggested methods, the author is characteristic of many developing countries. inquired 320 enterprises in the rural territory
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of Pieriga region in the year 2006. Dierently researched also earlier. Nowadays, this issue employed respondents took part in the inquiry: is studied widely and there is not unequivocal agricultural producers, industrially employed, and explanation of this concept yet. Therefore workers of service sphere. All their enterprises almost each scientist who researches this question were situated in rural area. For the analysis gives also a de nition. Sociologist P.Bourdieu of the results, 313 inquiry forms were used de nes social capital as all the active and passive because the others were assumed as invalid. The resources connected with long, more or less analysis of the results showed which features institutionalized relations of mutually recognized and indicators characterize the presence of social cooperation nets (Bourdieu, 1986). P.Bourdieu capital the best and how social capital in uences considers that amount of social capital to each the development of an enterprise. To express individual depends on expanse of the net he/she social capital numerally, the situation balance can mobilize eectively for his/her needs, and on method and con dence indicator were used. In amount of capital that he/she can get from each all, 28 questions were included in the inquiry form. element of the involved net. P.Bourdieu perceives The owner of the enterprise could choose one social capital as a tool for gains of individuals by to ve answers to a question that characterizes their skills to involve in groups and be sociable his/her social capital and development of his/ to get to needed resources. Sociologist A.Portes her enterprise. The results of the research were de nes it similarly: `Social capital is ability of processed using MS Excel and SPSS - Exact Test individuals to manage selected resources due to programmes. their participation in nets of relationships or some social structure; this ability is not within an Results of the Research and individual but in his/ her relationships with the Discussion others' (Portes, 1998). Social capital is a result of liabilities. Role of social capital Sociologist J.Coleman considers that `social In economics, conception of capital describes capital is group of multiple dierent elements all production means created by people and with two common features: they all have some gathered by generations that serve for goods peculiarities characteristic to the social structure; production and service. Capital is one of and they release some activities to the individuals production factors, i.e., land, work, nance, within the structures' (Coleman, 1988). He and entrepreneur skills. Capital is created by speaks about three forms of social capital: duties human work. Money ow re ects the ow and expectations, channels of information, and of real material values. Real capital wears social norms. J. Coleman stresses dierence out physically and morally. Physical wearing between social capital and private resources even out takes place due to production process and more when he speaks about social capital as natural forces. Moral wearing out is connected public bene t, i.e., it forms social structures with with scienti cally technical progress that results involved people and `social capital is not a private in constantly improved capital bene ts - they property to everybody who bene ts from it'. become more productive, consume less energy, From the theory of social capital, it is known and become more compact. To use the productive that `social capital could be de ned as social capital, land and its resources, human work is relationships in the society' (Pizza - Georgi, 2002). necessary. But to do a job, knowledge, experience Not only particular sociologists have turned to and skills are needed. It means that human work research of social capital but also institutions, abilities have to be developed and corresponding for instance, the World Bank. In its researches, to modern demands. Such developed human social capital refers to institutions, relationships working skills are called human capital. Therefore and norms forming quality and amount of social human capital can be considered to be a special interactions of the society. This institution speaks kind of capital. Human capital is particularly about two kinds of social capital: connected with people. But it is not the only capital of this kind. Recently, one more such 1. binding social capital with horizontal kind of capital is researched and acknowledged in links among people, social collaboration the world. It is social capital. Human capital and norms in uencing productivity and is an individual resource but social capital can prosperity of group work. Social capital be found in relationships among the individuals. releases coordinating and collaboration. Sociologist L.Hanifan (Hanifan, 1916) de ned the These links give feeling of identity and notion of social capital in 1916, although it was common aim to groups;
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2. connecting social capital with vertical links seems to be fundamentally dierent from the needed for `bridge' relationships, stepping Coleman's (social capital is individual resource over lines of a social group (religion, used to increase one's usefulness). Social capital nationality, socially economical status etc.). can be a resource and an advantage at the same time. It increases individual usefulness of an Social capital could be considered as special form individual and `releases some activities of an of human capital expressed in relationships among individual'. Therefore social capital is connected individuals. J.Coleman (Coleman, 2000) states also with entrepreneurship both as a resource for that human capital is abilities possessed by a activities and advantage (for instance, life style of person but social capital is contribution by people the entrepreneur). interacting with activities and problems solving. Regional social capital is expressed through The concept `social capital' is associated with relationships at households, with workers at bene ts for an individual, a family and social enterprises or people beyond the municipality. groups from society and close connections that Business outside the territory of municipality is help to solve dierent problems. Social links go arranged formally and informally (Str kis,Pelse through any sphere of human activities including et al., 2004). rural development. R.Putnam considers `social An interesting eect of social capital is nets and the involved exchange norms' as the observed regarding the living place. An central idea of social capital. At rst, it is entrepreneur can follow his/her ideas or character important for the involved; and sometimes social of the new business and leave the community. But nets are bene t for those who are not involved. his/her nancial expectations - property and debt Therefore such social nets are individually and - increase with longer time at community because socially important. As the most important thing, it broadens his/her access to local social capital now he assumes to make `theoretically united (Gleaser et al., 2000). And, of course, local leaders and empirically valid dimensions of social capital and investors have great interest to keep the that could be really measurable'. The scientist entrepreneur there. If an entrepreneur involves observes statistical data on USA organizations in the community successfully then dynamic and formal institutions in 20th century till 1997. feedback occurs: people with businesslike thinking He agrees with M.Woolcock (Woolcock, 2001) remain because of nancial reasons and can take that social trust is not basic index of social capital part at local social capital. but rather its consequences. R.Putnam considers Dierent forms of capital are formed basing on that social trust diminishes with generations in combination of xed capital, other forms of capital the USA: younger Americans trust less than older and work. Financial, physical and human capitals ones. He assumes also that social links determine need each other and social capital is also necessary level of altruism in the society. Analyzing social to realize and collect them. In the case of human capital, the scientist reveals that the states closer capital, it often happens practically. Theoretically to Canada have higher level of social capital speaking, human capital can be collected without while it is lower in the states with previously interventions of nancial and physical capital widespread slavery. Migration is connected with but not without social capital. Many forms of also higher social capital. R.Putnam (Putnam, social capital are less dependant on nancial and 2001) compares social capital with economical physical capital than human capital. Although success and reveals strong connection between some kinds of real capital release forming of social individuals of higher education and social capital. capital (investments in projects which is socially Income and social inequality are lower in the important for the most part of the society), human states with high social capital. R.Putnam capital helps to generate social capital. Time is considers that causality works in both directions. the value that is most of all invested in social Economist G.Becker (Becker, 1996) observes the capital. J.Coleman (Igaune, 2006) considers that concept of social capital and connects it with social capital diers from other kinds of capital by function of household usefulness: `Function of its character of oal. Other kinds of capital are usefulness depends not only on dierent bene ts formed purposely but social capital is an outcome at any time period but also on personnel and of purposeless social interaction that is commonly reserve of social capital at the same moment' orientated towards pro tability. (Becker, 1996). By this scientist, social capital is compound of advantages caused by experience Characteristics of Pieriga region `succeeding prosperity, regularly takes part in The statistical region is regional division of production that promotes welfare'. This view the state territory, used for statistical registration
287 Ed teIgaune SOCIAL CAPITAL IN PIERIGA REGION and gathering of regional information. Statistical the core of it (Riga, Jurmala, and Riga district). regions are set in all the territory of the EU. Riga region is territory with the highest density They are based on the Nomenclature of Units in Latvia - it exceeds the average density of the of Territorial Statistics (NUTS) by EUROSTAT. state more than three times. Besides 60% of There are 6 statistical regions set in Latvia: the inhabitants of Riga region are at giving age Riga, Pieriga, Vidzeme, Kurzeme, Zemgale, and (15 to 60 years), 16% are before the giving age, Latgale. It has to be marked that borders of the and 24% - older than giving age (Data by Latvia statistical regions agree with the borders of the Enterprises Register, 2006). administrative regions (Keiss,Kazinovskis, 2001). Almost one third (32%) of the territory of Riga Planning region is a territory set by government region is agriculturally used land. Most part of or municipality for elaboration of development it (101 830.9 ha) and the greatest percentage is plan and realization of de nite aims and tasks in Tukums district - 41.4% of territory of the according to development planning. There are district. In Limbazi district, agriculturally used 5 planning regions in Latvia: Riga, Vidzeme, lands are 81 888.5 ha or 31.5% of the area of the Kurzeme, Zemgale, and Latgale. Merging district, then follows the Riga district (81 620.6 statistical regions of Riga and Pieriga (Jurmala, ha, 26.1% of the total territory). The least area Limbazi district, Ogre district, Riga district, and of agriculturally used lands is in Ogre district Tukums district), the statistical region gets the (65773.5 ha) but it takes 35.7% of the territory. same territory as Riga planning region (MK, Taking into account the urban character of the 28.04.2004). region, percentage of the agricultural territories is lower in the region than in the state (38.3%) Planning of Riga planning region was (Data by Latvia Enterprises Register, 2006). elaborated basing on Decree No. 6 (02.05.2003) Residential centres - concentration places `On Elaboration of Development Plan of Riga of work, service, and homes - are forming Planning Region' by Development council of Riga residential functional structure within Riga planning region. To secure successful elaborating region. Their connections are regional functional of the plan, Agreement on Collaboration of daily communications that are characterized by Development Plan for Riga Planning region was mobility and tra c of the inhabitants, as well set among Riga Council, Jurmala council and as by internal and external economical and regional governments of Limbazi, Ogre, Riga and administrative communication. Comparing GDP Tukums (20.05.2003). Spatial planning of Riga per capita in prices, it was 5881 lats in Riga planning region for 20 years was worked out region, but the lowest in Latgale region - 1490 in connection with middle- term document (7 lats in 2004 (Regional statistics, 2007). This years) - development program of Riga planning indicator is according to number of economically region. Riga region consists of two cities active enterprises in the regions. The more such of republic importance (Riga and Jurmala) enterprises, the greater the GDP per capita. and four districts (Riga, Limbazi, Ogre, and Tukums municipalities) as well as municipalities In uence of Social Capital on the Development of of rural areas. Totally Riga planning region is Enterprises compound of 75 municipalities: two cities of Economical development of dierent regions republic importance, 13 towns' (including 8 towns of Latvia is dierent. Farms near Riga are with rural territories), 5 regions' and 55 local developing fast but development in Latgale region municipalities' (Ozoli na, 2006). In this work, is very slow. New conditions have emerged in the the author pays attention to rural territories, development of economics with personal intellect their inhabitants and entrepreneurship connected and creativity as the main factors. It is as a with agricultural production, industry and symbol of economical boom. That is why social service. Number of farms per 1000 inhabitants is capital and trust have an increasing role in the regionally dierent: from the year 1991 to 1995, society. Studying the researches of the scientists, the least was in Riga region - 0.8, but the greatest indices of social capital were assumed that can be in Vidzeme region - 26, 6. Correspondingly from applied determining capacity of social capital in 2001 to 2005, in Riga region - 0.1 as the least, but the economics of Latvia (Anc ans,2002). They the highest in Zemgale region - 1.4.farms (Data are as follows: by Latvia Enterprises Register, 2006). A total of 1.2 million or 47% of all the inhabitants of 1. participation at some NGO or association; Latvia live in Riga region. Near a million - 941 2. participation at competitions `The Best thousand or 86% - citizens of the region live in Yard' on the levels of municipalities and
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the state; ve answers of a question that characterizes 3. cooperation characterizes economical his/her social capital and development of his/her collaboration; enterprise. One part of the questions explained 4. number of members of trade unions shows indices of social capital but another - economical interest in improving work conditions; indices during recent ve years. 5. participation in election is an individually It can be concluded from the data of Table expressed attitude to social and political 1 that out of 313 respondents taking part in the activities; inquiry, 252 or 80.5% are owners of the farms and 6. subscribers of newspapers participate enterprises, 205 of them or 65.5% are agricultural actively in obtaining dierent information; enterprises, 26 or 8.3% are industrial enterprises, 7. participation in dierent enterprises and 82 or 26.2% are service enterprises. Financial (cultural, sports) point to abilities of turnover of the enterprises above 100 101 LVL is collaboration and communication; just 53 or 16.9%. By the results of the research, 8. trust, educating and patriotism show enterprises managing more than 200 ha of the attitude to facts and personal traits (Igaune, land compound 19 or 6.1%. In all, 176 men and 2006) 137 women took part in the inquiry. Further the author is analyzing responses to the question In economics, partly in rural entrepreneurship, `Do you agree that your enterprise develops?' presence of social capital is determined together The author characterized the answers of Table with informal social nets and formal organizations 2 as frequency balance. Usage of the situation where individuals and rural enterprises take part balance method (EU Programme of Business by production and services. and Consumer Surveys, 1998) allows reducing In 2006, in the rural territory of Pieriga responses of each question to a single number. region, sociological inquiry was performed in 320 enterprises. A total of 313 questionnaires were The situation balance of the answers to the used in the analysis of data because the rest were question in Table 2 is +70.7%. It means that assumed as invalid. Agricultural, industrial and the respondents consider that their enterprises service enterprises took part in the research. In develop. It is a high level indicator. Further the the results analysis of the research, the indices responses to the question `Who has the greatest of social capital were expressed by numbers, merit in the development of enterprise or farm?' using the situation balance method and con dence are observed. indicator. The inquiry form included 28 questions. Here the respondents could give more than one Owner of the enterprise could choose one to answer. By the data of Table 3 we can conclude
Table 1 Characterizing indices of participants of the inquiry in Pieriga region in 2006 Indices Number Structure, % Owner 252 80.5 Manager 35 11.2 Specialists 26 8.3 Totally 313 100.0 Agricultural enterprises 205 65.5 Industrial enterprises 26 8.3 Service enterprises 82 26.2 Totally 313 100.0 Financial turnover in 2005: to 3 000 LVL 71 22.7 from 3 001 to 10 000 LVL 81 25.9 from 10 001 to 45 000 LVL 58 18.5 from 45 001 to 100 00 LVL 50 16.0 above 100 001 LVL 53 16.9 Totally 313 100.0
Source: data by the author's research (2006)
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Table 2 Responses to the question `Do you agree that your enterprise develops?' in Pieriga region in 2006 No. Variants of responses Frequency of responses Percentage, % 1. I absolutely agree 197 62.9 2. I agree partially 79 25.2 3. I disagree partially 16 5.1 4. I totally disagree 7 2.2 5. Di cult to say 14 4.6 Totally 313 100
Source: data by the author's research (2006)
that the greatest merit in the development of the 3. subscribing of the press shows awareness and enterprise is awarded to `my ability to collaborate activities for information obtaining; with other people' (25.9%). Such answer is given 4. membership in associations and by more than one fourth of the respondents. cooperatives characterizes voluntary It is known from the theory of social capital economical collaboration. It gives that `social capital could be de ned as social remarkable support to its members; relationships in the society' (Pizza - Georgi, 2002). 5. trust and attitude to facts reveal personal From the answers of the respondents it can traits. also be concluded that owners or managers of the enterprises are with great capacity of social These indices are evaluated separately in the capital, they have it and social capital is of branches of agriculture, industry and service. great importance in development of their farm or Then the author calculates the situation balance enterprise. by branches of the enterprises. The author concluded ve indices of social At rst, percentage of the responses by the capital from the results of the inquiry. They are: branches is gained. Then the situation balance is calculated as dierence between percentages 1. results of elections - participation in of marginal responses. The answer `di cult to elections of Saeima or municipality is active say' is neutral, therefore it does not impact the position of an individual to social and balance. Situation balance in the branch of political activities; agriculture is +70.3 (Table 4). Analogically the 2. participation in competitions connected situation balance is calculated for the branches with living place in the country points to of industry and service. In the industry, it is collaboration and communication ability; +61.5 and in services it is 75.0. Evaluating
Table 3 The responses to the question `Who has the greatest merit in the development of enterprise or farm?' in Pieriga region in 2006 No. Variants of responses Frequency of responses Percentage, % 1. My personal traits 136 21.0 2. My ability to assume new 126 19.4 information 3. My ability to collaborate with 168 25.9 other people 4. Support by the EU and the state 136 21.0 5. Good market conditions 76 11.7 6. Other variant 7 1.0 Totally 649 100
Source: data by the author's research (2006)
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Table 4 Responds on the question about development of branches in rural enterprises in Pieriga region in 2006 Contents I I agree I disagree I totally Situation balance absolutely partially partially disagree agree Percentage, % 61.95 25.85 6.34 1.43 Coe cients +1.0 +0.5 -0.5 -1.0 % multiplied by +61.95 +12.93 -3.17 -1.43 the coe cient Situation +70.3 balance
Source: data by the author's research (2006) responses of the respondents of the three branches The con dence indicator of the respondents on development of their enterprises, the author of agricultural and service branches is positive. concludes that balance of answers is the greatest It means that owners and managers of these in the branch of service. Indicator of con dence of enterprises have big capacity of social capital. But social capital indices is evaluated from the results owners and managers of industrial enterprises do of the research. not have enough capacity of social capital. Organizations and institutions trusted the Conclusions most by the respondents are: bank, municipality, and the State Revenue Service. Indicator of 1. Using acknowledgement of social capital by scientists, adjusting it to economical con dence: {+74.5 + (−73.8) + 89.5 + (−44.4) + processes and taking into account the 34.2}/5 = +16.0%. presented research, the author concludes By the results of the inquiries and by the that social capital can be de ned as calculated indicator of con dence (+16%) we can net of relationships that is more or conclude that leaders of the above- mentioned less institutionalized and gives access to farms have social capital. The bigger the indicator necessary resources. of con dence, the greater the capacity of the social 2. Inclusion of social capital in the analysis of capital. Calculating the indicator of con dence economical data means that at least some to social capital by branches, it is as follows: social activities and relationships, processes in agricultural branch - 80.0 + (−65.9) + 88.2 + and changes are becoming endogenous to (−31.4) + 24.7 = +95.6/5 = +19.1; in industrial economics in the society. branch - +71.2+(−92.3)+61.5+(−88.4)+23.1 = 3. Evaluating researches by dierent scientists, −20.9/5 = −4.2; and in service branch - +61.6 + indices of social capital are selected (−87.8) + 63.0 + (−63.4) + 29.3 = +2.7/5 = +0.5. that are to be included in economical
Table 5 Evaluation of social capital indices by the indicator of con dence in Pieriga region in 2006 No. Questions Situation balance, % 1. Did you take part in recent two elections of the municipality? +74.5 2. Did you take part in competitions `Sower' and `Then icest -73.8 yard of the district'? 3. Have you ordered the press during the last year? +89.5 4. Are you a member of some cooperative? -44.4 5. Name three organizations, institutions you trust mostof all. +34.2 Indicator of con dence +16.0
Source: data by the author's research (2006)
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researches - individual participation in the mentioned enterprises have social capital. elections, activities and participation in 5. Social capital has positive impact on the associations and cooperation, and activities development of enterprises. It promotes for information obtaining and trust. the development. It is seen by the results 4. By the results of inquiries of rural of the research that the most capacity for enterprises in Pieriga region and calculated social capital is in the branch of agriculture. indicator of con dence of social capital The hypothesis is proved: social capital indicators that is +16%, the author promotes development of rural enterprises concludes that leaders of the above- of Pieriga region.
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